Thursday, September 1, 2022

The Long Decline in the Middle

 From Tom Piatak at Chronicles:

A graph making the rounds on Twitter shows that, since 1970, the share of aggregate national income held by the middle class has plummeted while the share held by the rich has skyrocketed and the share held by the lower class has barely budged. I do not know if this graph has all the particulars right, but its thrust is undoubtedly correct. The decades-long decline of the once-great American middle class is the overarching political reality that the professional conservative movement has spent decades ignoring, obfuscating, and even celebrating.

At about the same time, I came upon an illuminating interview of financial journalist David Gelles by David Leonhardt in The New York Times. Gelles has written a book about the impact of longtime General Electric Chief Executive Jack Welch on the American economy. Welch, who took the reins at GE in 1981, was held up as the model CEO for decades, and many lesser CEOs took their cues accordingly. Welch’s overall approach is neatly summed up in his quip that he wished all GE’s plants were on barges so that he could ship them at a moment’s notice to whatever dismal spot on the planet then had the lowest labor costs. He’d need just enough infrastructure to allow GE to build its goods there and then to bring them back, tariff-free, to sell to Americans.

I never understood the adulation for Welch because I thought what he was doing was, at worst, economic treason and, at best, a renunciation of all the non-economic ties that used to bind companies to communities. As the article noted, Welch “unleashed a wave of mass layoffs and factory closures that other companies followed.”

Before Welch, layoffs were seen as a last resort, a triage measure to save money in a company that was otherwise going to fail. After Welch, layoffs became an accepted way of boosting profits, even at companies that were not in distress. Plants began to close, and jobs got shipped overseas with no concern for anything other than the short-term impact on the bottom line. Most of the profits at GE went to big investors in the form of stock buybacks rather than toward increased wages for workers, improved factories and equipment, or expansion in research and development. (Read more.)


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